Australia laps up U.S. buy-now-pay-later lender Sezzle in IPO

(Reuters) - Sezzle Inc, a rare U.S.-based buy-now-pay-later lender, shone in its debut on the Australian Securities Exchange on Tuesday, leveraging Australian investors’ familiarity with the sector and nearly doubling its value by the day’s end.

The Minneapolis-based company closed the day at A$2.20 per share, shy of the A$2.58 session high, nearly double its initial public offering (IPO) price of A$1.22 a share.

Sezzle, yet to post a profit, only operates in the United States and Canada and said it will fund growth in those two countries with the A$43.6 million ($30.03 million) it raised from the oversubscribed IPO.

“We certainly haven’t sold any of our shares, we think they may trade higher in the coming days and weeks,” said Dean Fergie, portfolio manager at Cyan Investment Management, a fund that bought shares in the IPO.

The listing comes as Australian lawmakers have called for tougher regulation of these lenders and as a regulator ordered an external audit of rival firm Afterpay Touch Group Ltd over suspected non-compliance with anti-money-laundering laws.

Buy-now-pay-later companies let shoppers purchase products without paying upfront, and without the regulatory hurdle of applying for a credit card or loan. They typically make money by receiving fees from vendors.

Afterpay’s problems have pressured the sector that has become a favourite of analysts because it is expected to benefit from the growth in online shopping as millennials dominate the workforce in the United States.

Afterpay and other local buy-now-pay-later companies such as Zip Co Ltd, FlexiGroup and Splitit Ltd all closed lower on Tuesday compared with a broader market that rose to a record peak on Tuesday.

Sezzle, which launched its lending platform in 2017, has brought on a payments lawyer to audit its anti money laundering compliance and know-your-customer processes in the United States, Chief Executive Charlie Youakim told Reuters on the phone.

He added that the company plans to conduct a yearly audit.

Sezzle said it had 429,898 active customers as of June 30, up roughly 60% from the previous quarter. Active merchants rose to 5,048 from 3,321.

The company is looking to diversify as well.

“We’re definitely exploring other countries,” said Youakim. The company considers United Kingdom, Europe and Mexico as prospects but Youakim said decisions on expansion were not imminent.

“More of a wild card idea would be India,” he said, citing its huge online market opportunity as a positive.